Microsoft agrees to pay $250 million to settle increasingly ugly Activision Blizzard shareholder suit
Lawsuit threatened to re-litigate misconduct allegations against Activision Blizzard that preceded the Call of Duty/Warcraft/Candy Crush maker's sale to Microsoft.
One of the game industry’s more bizarre legal sagas may be coming to an end.
Microsoft has agreed to pay $250 million to settle a 2022 class action lawsuit brought by a Swedish pension fund that originally hoped to to thwart the tech giant’s $69 billion purchase of Activision Blizzard.
That’s according to a notification of a preliminary settlement filed yesterday to Delaware’s Court of Chancery and made public today.
The pension fund, Sjunde AP-Fonden (or AP7), had argued that in 2021 Activision Blizzard CEO Bobby Kotick had rushed the sale of the company he’d built up for decades to avoid the threat of termination. AP7 alleged he had therefore deprived shareholders of a better stock price than the $95/share agreed to by Microsoft.
Kotick had vehemently denied this, pointing to another settlement to disprove the claims and to the state of the current game industry to argue he’d secured a good price. Microsoft also maintained it had participated in a fair sale process.
Should a judge approve the settlement, all shareholders who owned Activision stock between Microsoft’s January 2022 announcement of its Activision Blizzard bid through the closing of the deal in October 2023 will be eligible to receive another 30 cents per share.
As is the norm, no one in the settlement admitted to any wrongdoing. Language of the settlement locks such sentiments in.
“Microsoft is entering into this Stipulation solely to avoid the burden, expense, and distraction of continued litigation,” the company said in the notification about the settlement.
It continued:
“Microsoft does not substantiate any allegations that there has been systemic or widespread workplace misconduct at Activision; that Activision senior executives ignored, condoned, or tolerated a culture of systemic harassment, retaliation, or discrimination; or that Activision’s Board of Directors, including its Chief Executive Officer, Kotick, acted improperly with regard to the handling of any instances of workplace misconduct.”
In its 2022 lawsuit, AP7 had parroted claims derived from a July 2021 sexual misconduct and discrimination lawsuit brought by the state of California’s Department of Fair Employment and Housing, later renamed the California Civil Rights Department, or CRD. That suit did not directly accuse Kotick of misconduct, but it excoriated his company for a “‘frat boy’ workplace culture” of alleged sexual misconduct by managers and workers at Activision Blizzard. That suit was settled in late 2023 for $54 million, with all allegations withdrawn.
With this new settlement, AP7 has backed off, now saying the CRD itself admitted its claims had never been “substantiated”:
“Plaintiff acknowledges that its original claims were based in part on media reporting and characterizations of allegations made by the California Civil Rights Department (the ‘CRD’), which the CRD itself admitted in a court-approved consent decree have never been ‘substantiated’ by any “court or independent investigation” and now have been expressly withdrawn.”
Those statements from Microsoft and AP7 are made prominently on the second page of this week’s 58-page settlement notice. Their subject matter underscores the extent to which a pension fund’s shareholder lawsuit had transformed into a potential re-examination of sexual misconduct claims made about Activision Blizzard five years ago.
That dynamic was certainly clear in January, when Game File was first to report about Kotick’s extensive efforts to use the case to present his version of the final years of his run at Activision Blizzard and the aftermath of his company’s sale.
A lawsuit about other things
In an extensive filing made public that month, Kotick alleged that AP7 had brought the lawsuit to benefit the Swedish gaming company The Embracer Group, in part to distract from bad news about a delay to Dead Island 2. He alleged that one of Embracer’s executives at the time, Emma Ihre, used her position on AP7’s board to bring a suit that could arguably weaken Activision. (Ihre did not reply to a Game File request for comment at the time; Embracer denied to Game File that it had anything to do with the suit being brought.)
Kotick’s lawyers said in January that he would use the suit “to shine a light on the gross misconduct of the activists who invented the false narrative of misconduct at Activision, and to expose the relationship between those activists and AP7.”
The former Activision Blizzard CEO also argued that the 2021 claims of misconduct at the root of lawsuits like California’s had been trumped up by labor organizers and their political allies to motivate well-compensated video game workers to join unions (and pay dues) for protection.
The Communication Workers of America, the main union accused by Kotick, had called such claims “false” and “insulting to the Activision workers who spoke out about the harassment they faced.”
(In 2021, Activision Blizzard had settled a separate sexual harassment suit brought by the U.S. federal government for $18 million; at the time Kotick said he was “grateful to the employees who bravely shared their experiences” and said “I am sorry that anyone had to experience inappropriate conduct.”)
Crucially, Kotick’s filings in the AP7 case have cited court-approved language from the 2023 California settlement that matches what appears in this week’s AP7 settlement. From the CRD one circa 2023:
“no court or any independent investigation has substantiated any allegations that: there has been systemic or widespread sexual harassment at Activision Blizzard [or] that Activision Blizzard senior executives ignored, condoned, or tolerated a culture of systemic harassment, retaliation, or discrimination.”
Those sentences about unsubstantiated allegations and independent investigations (Activision disclosed the results of one in 2022) have, in fact, been a mantra for Kotick in recent years, as he has used them to manage his reputation.
The former Activision Blizzard CEO has worked with a legal team to press news outlets that cover Kotick and/or the 2021 suits to use those California settlement words in their stories—or update them under legal pressure if they don’t.
Last October, for example, a Reuters report about the status of the AP7 lawsuit was updated to note:
In an October 7 letter sent after publication of this article, Kotick’s defamation counsel disputed claims of widespread harassment at Activision.
“Not a single investigation, court finding, verdict, or ruling ever concluded that there was any merit” to the allegations of widespread harassment at Activision, Tom Clare and Nick Brechbill of Clare Locke wrote.
Note: It happened to me, too. After I published my January 2026 piece about Kotick’s take on the AP7 suit, Clare Locke attorneys contacted me, demanding that I add that California settlement’s language to my story. When I pointed out that my article had already included those lines, they apologized.
Microsoft, which is the biggest party settling today, has kept a lower profile in the case in recent months. It did not co-sign Kotick’s claims about the origins of the suit.
Kotick had been replying to the lawsuit as a former member of Activision’s board and therefore as one of the lawsuit’s defendants. Near the start of 2026, he even counter-sued AP7 over what his side claimed was an “abuse of process” in the suit being brought in the first place (this is where the allegation about AP7 suing to help Embracer came from).
In January, the Swedish pension firm called Kotick’s counterclaim against them “rambling, bizarre and baseless.” They accused him of trying to “hijack this proceeding for the purpose of litigating a vendetta against government regulatory agencies and unions.”
Kotick’s side was no doubt casting a wide net. They had issued subpoenas to numerous current and former officials from the California Civil Rights department, showing an intent to pressure the very parties he believed conspired against him to testify under oath. By February, Activision’s former board said they wanted to subpoena a former National Labor Relations Board official who worked with a union organizing game workers. They also asked the Delaware court to apply pressure under the Hague Convention to serve discovery of Embracer chairman Lars Wingefors.
AP7, meanwhile, pressed to re-open the settled misconduct allegations of 2021. It sought access to statements, interviews, and testimony from the California and federal investigations, all to build their argument that Kotick’s leadership position in late 2021 was precarious and motivating him to move fast on a sale. Into the weeds they went in their filings, questioning what Activision’s board knew and when they knew it.
All of this meant that what had ostensibly been a shareholder payout lawsuit dragging along since 2022 could in 2026 have become a legal showdown over misconduct claims at Activision Blizzard. Such a showdown had never fully happened before. The claims of 2021 had been settled instead of going into a full trial, without a judge or jury deciding either in support of the allegations or finding them lacking.
This past February, at its most aggressive, AP7 was even ready to aim its legal firepower on a key part of Kotick’s reputational defense, that language from the California settlement. AP7’s lawyers wrote:
“The full text of the recital makes clear that it is not a finding that there was no widespread sexual harassment at Activision, but only that there was as yet no court opinion or order or final conclusion in an independent investigation making formal findings that there was such widespread harassment…”
A month later, Kotick’s team responded, saying, no, the California language was solid:
“although AP7 may quibble with the Consent Decree’s language and the settlement payments—it cannot deny that the CRD Consent Decree stated unambiguously: ‘no court or any independent investigation has substantiated any allegations that: there has been systemic or widespread sexual harassment at Activision.’”
Within weeks, as seen today, AP7 would also adopt such language in its own settlement with Microsoft and Activision’s former board.
About the board of directors, it should be noted that Kotick’s side argued in March that AP7’s approach was focusing on the wrong things:
“Paintiff’s insistence on relitigating the merits of regulatory investigations and individual allegations of harassment has no place in this Action, which concerns whether members of the Activision Board of Directors fulfilled their fiduciary duties in pursuing and approving this transaction, and therefore turns on what the Directors knew and did”
As of today, AP7 has backed off its skepticism about the board’s support for Kotick. This is from the pension fund in the new proposed settlement:
“based on the materials provided to date, there is compelling information which undermines any claim that the Board or Mr. Kotick failed to operate in good faith with respect to the matters alleged in the Action.”
A hearing on both sides’ arguments and counterclaims, much of it about discovery and just how much of Kotick’s arguments would admissible as part of the suit, had been slated for May. Pressure had been mounting for more document disclosures and more depositions of people in the orbit of any of the issues raised.
But in March, the new filings reveal, a mediator proposed a $250 million settlement.
By early April, all sides began the paperwork to agree to it.